In the news this week

Author: John Crabb, Karry Lai, Olly Jackson | Published: 8 Jun 2018
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EMEA: on high alert

Italy’s decision to issue mini-buoni ordinari del Tesoro, government IOUs to suppliers or taxpayers which will be accepted to pay taxes, is concerning EU ministers over fears it could set Italy on the road to leaving the euro. Greece allegedly proposed a similar move at the height of their debt crisis when a referendum was held about its future in the eurozone. Markets have reacted negatively to the news, with Italian bond yields at their highest since the debt crisis.  

The General Data Protection Regulation (GDPR) is expected to impact alternative assets significantly. Without changing the way they operate, it will be impossible for companies operating in this sector to retain, organise and recall information on each end investor, keep track of how many times each investor has been contacted, and why and how information has been shared. Currently, alternative assets companies generally record fund filings, investments and their annual statements exclusively on paper, partly down to the fact alternative assets are a small part of the wider financial services industry.

APAC: on a roll 

The Monetary Authority of Singapore (MAS) is requiring investors to report their short positions and short sell orders in securities listed on the Singapore Exchange from October 1 2018, if the positions/orders reach or exceed the lower of 0.2% of total issued shares or units or S$2 million ($1.5 million approximately). Investors will need to report their positions to MAS through the online short position reporting system. The move aims to improve transparency on short-selling activities and enable investors to make more informed decisions. 

The Hong Kong Exchange is making amendments to its listing rules to create a new delisting framework starting August 1 2018. The changes aim to establish a framework to facilitate timely delisting of issuers that do not meet listing criteria and to provide certainty to the market on the delisting process. The number and duration of prolonged suspensions of trading in issuers’ listed securities are expected to decline with the changes.

Coinbase has  entered the Japanese cryptocurrency market after a six-year wait, one of only a handful of companies allowed to operate in the country. The move comes at the same time the country’s regulator, the Japanese Financial Services Authority (JFSA), is keen to strengthen investor protection after the record-breaking hack on cryptocurrency exchange Coincheck in January and Mt. Gox’s bankruptcy in 2014. However increased regulation could prove a good thing, especially if it is tailored to the market’s unique needs.

Americas: all change

The financial rule rollback is gaining momentum, with proposals by the Federal Reserve Board to revamp the Volcker Rule going further than expected. These have been largely well received as the agency looks to simplify and tailor application of the Rule without removing its protections too extensively. The Fed issued the proposal on May 30, in addition to asking for comments from the industry. Any changes will require all five administrative agencies to follow suit if they are to be ratified, with which they were developed. 

The Commodity Futures Trading Commission (CFTC) backed the proposals during an open meeting on June 4, with commissioner Giancarlo thanking his fellow regulators and suggesting that the amendments do not disrupt the core principles of the original version of the Rule.

The CFTC is also in other news, with its proposal to amend the de minimis exception in the swap dealer definition of its regulations, bringing welcome clarity for the industry. 

The regulator keeps the aggregate gross notional threshold at $8 billion despite its original intention to eventually sunset the number to $3 billion. Gabriel Rosenberg, partner at Davis Polk, said the decrease to $3 billion would capture very little in the way of derivatives activity. However, it would take a number of regional banks and institutions that are not in the swaps dealing business, but for one reason or another provide some level of swap activity to their customers, and would have brought a lot of them either in scope or made them need to do careful and rigorous analysis to determine whether they were.